Y Combinator CEO on How AI is Changing What Startups Build

if you want to know how ai is going to change the workplace one of the best places to look is at startups and there's probably no one more steeped in the world of startups than this guy hi my name is gary tan and i'm the president and ceo at y combinator if you haven't heard of y combinator you've definitely heard of some of the startups that's helped launch airbnb doordash coinbase yc as it's commonly known is a startup incubator gary says it gets about a hundred thousand applications every year but only a few startups get accepted those that are get up to a half a million dollar investment gary prolifically posts about his ai use and he says that ai is changing everything about how companies are being created these days and it's also changing how human beings are being created these days and it's also changing how humans are being created these days he works as a ceo last month i got on a call with gary he was in san francisco and i was in a studio overlooking time square if you want to see a video of our conversation head to spotify you use ai agents a lot you've talked a lot about how ways you're putting it into your life what are you having to do and what do you find that it's most useful at i mean i think of it as like self-driving rocket for the mind and so interesting like back in the day you you might have to have a team of a hundred or a thousand people to get done something that now only takes like 10 or 15 people and so you know i i think that incrementally this means that we need to boil the ocean like we need to increase the um ambition of founders and there are just more things that people should be doing how long do you think it'll be until ai is as good at your job as you are it can't prompt yet so you know i i'm on the lookout for that um i actually stopped drinking in february because um i found that uh you know even having a single beer would make it much much harder to uh think about code and like sort of run coding agents um but you know i i would i would say i'm going to start drinking again when uh the coding agents don't need me anymore and uh i would guess that that's sometime in the next like six to 18 months wow that's soon yeah i mean are you worried though about your own i mean i still i think the most important thing at that point will still be the most important thing it'll be knowing what to build it'll be like you still need a human you still need a human who knows other humans uh you still need to understand context you still need to uh figure out well what do people want and why and then how do i build a thing um you know the mechanics of it get easier and easier but but knowing what to build and knowing what to want uh is still a very very human thing welcome to the journal our show about money business and power i'm ryan knudsen coming up on the show a conversation with gary tan about ai and startups this episode of the journal is brought to you by harvey an ai platform designed for legal and professional 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need the right person to cut through the chaos this is a job for indeed sponsored jobs and listeners of this show will get a 75 sponsored job credit to help get your job the premium status it deserves at indeed.com slash podcast just go to indeed.com slash podcast right now and support the show by saying you heard about indeed here indeed.com slash podcast terms and conditions apply hiring now then this is a job for indeed sponsored jobs so i want to talk most of mostly about ai today there are seem to be two extreme two extreme views of where ai might take us on the one hand there's people that worry about an ai apocalypse that it might bring about the end of humanity and there is on the other end of the spectrum there are people who think that it could bring about a utopia in the future um where do you fall on that spectrum i mean i think it's going to be different and um utopia is probably two like things are going to change and anytime the cheese is moved uh they're going to be winners and losers um and then net net my hope is that there are more winners than losers because it's just a really really powerful technology and from our perspective you know we're trying to help people start new businesses and i you know deeply believe that uh doing that right means that you're solving problems and you're solving problems and you're solving problems and you're solving problems for other people and so in aggregate like you know this kind of technology in particular makes that way way more possible and so will people lose jobs yes uh on the flip side though like with ai it's like you know you used to have to hire a lot of people and uh raise a crazy amount of money and uh you know now you're actually able to create businesses for far far less and uh and there can be a lot more of them so in aggregate like i think humans can solve more problems and uh there's a lot more entrepreneurship that can happen like our standard of living will rise and uh things will just actually be the way they should be and maybe that is utopian so obviously y combinator you invest in startups you nurture startups um in what ways are you seeing ai allow people to start startups more quickly i mean the most simple version of this is uh you're able to write like one person is able to write uh a large multiple of what they used to be able to do so uh you know i run yc today about 13 years ago i was a designer in residence and i was building software for yc and in those days i was writing about 15 to 20 lines of code a day and you know that's not a lot but you know now with agents uh i've been doing something closer to 400 times that and so you're able to you know one person is actually literally able to do the work of 10 to 100 people previously uh and so what that means we're sort of seeing dozens of companies in the last few years go from zero to tens of millions of dollars in revenue um with like less than 20 people uh having only raised a seed round of like under five or ten million dollars so a lot of this is like unprecedented like you've never seen people be able to do that before and this is great like this is all great news for people who want to start companies it's great for people who want to start companies maybe not so great for people who want to work at those companies but in what how much those people should start companies um how much do you think that that can scale as a business gets bigger and bigger and bigger at what point does it need to start hiring more people or will it ever i mean this is where i think um this requires a change in mindset right um if you just want to maintain things as they are you just want to like sort of let people go um but i think that the world is actually so full of problems that um we're entering this other age and you know this might be like a change in the nature of types of companies that can be started gary says that the types of companies that y combinator had traditionally funded were software companies but thanks to ai yc is now working more in hard tech things like nuclear reactors and defense you know we have a company called toronol that's uh you know kills mosquitoes using drones for instance so is this did i see a video of them recently where like there's a little tiny drone that can oh yeah what does it do is it like i don't know how yeah it's got computer vision um and it just zaps you know oh it just flies right through them and just kind of cuts them up yeah huh and so you can you have a an array of them in your backyard and you know you can't have mosquitoes anymore and you know that would be nice this is a very concrete version of this is like five or ten years ago this is a company that maybe wouldn't have raised money like it just would have been too expensive to make a company and and they and they think of us as the mosquitoes i mean i'm being glib well then it'd be illegal right then it'd be illegal so you know i'd be the first to say like if this is starting to you know destroy society or you know be deleterious like hey maybe this is something we should slow down but i just see it as something like that and i just see too many i see too many places where this is actually so useful and so empowering. Here's a startup that if the cost of doing it became viable, if you can do it better, faster, cheaper, and then it becomes something that is ubiquitous, I would love to be able to go outside and not be covered in bug bites. Are there certain kinds of companies, people that have startup ideas that you say, we're not going to fund that or work with that because we think that that idea of yours, while interesting, is maybe too vulnerable to AI? Honestly, everything is so brand new. The rule book has been thrown out. Three or four years ago, you could argue that there were things that thousands of founders have gone after and tried to do. You could just safely say, no, that's not going to work. A thousand people have tried that. But right now, I think we're getting into a moment where we're going to have to do a lot of things. I think we're going to have to do a lot of things. I think we're going to have to get into a moment where we're going to have to do a lot of things. I think we're going to get into a moment where we're going to have to do a lot of things. I think we're going to get into a moment now where it's like, actually, all the rules have been rewritten and everything is new again. What about your company, Y Combinator? How much are you relying on AI to make decisions that a human used to make? Every single person at YC now has their own personal AI agent. And we have a company brain that actually flattens access to all the information so that it's actually super democratized. Have you run into any problems with that? I mean, have you run into any problems with that? But we're going to have to run amok a little bit and do things that you didn't intend for them to do. And we sort of hope that that remains an American company. And then there's a lot of tension right now around, you know, as we talk right now, like Kimi just came up with a Chinese model, just came out with, and they're about to release open weights on something that is almost as good as the very best American models. Would you switch to a Chinese model? With the right guardrails, I would. Because you can actually look at, you can instrument everything about what goes in and out of those models. And, you know, once again, like, all AI can be safe enough if you watch it and if you put it in the right harness and watch it the right way. Why does it matter then if those are American companies? I think that intelligence is so important that, like, it's really about access, right? If we want American companies, we want American innovators, and we want, you know, American defense companies, for instance, to be able to use whatever the absolute best is. And so, you know, when you're ultimately talking about, I mean, you're talking about dominance at the sort of societal level, right? Like, whose companies are the most innovative, whose products are the best, whose military is the best. And I think that over the next course of decades, all of those will ultimately be answered by who has the most intelligent models. For the past few years, the headlines on AI have been all about the inevitability of mass labor. It's something we've covered a lot here on The Journal, and we hear about it from listeners a ton. But it turns out that the transition to AI at the corporate level is happening more slowly than expected. And Gary thinks that's a good thing. Society will absorb this. I think there will be transformation in every organization, but it'll happen slower than we might think. And that might be a good thing. Like, when you look at a Fortune 500 company and you think, oh, it's going to take forever. Like, that's not a bug. It might actually be a societal feature, right? The organizational latency, just sort of the inertia of big companies, it may well be the saving grace for society at large. I interviewed somebody recently who compared AI to being a conductor. And he was like, you know, he worked in marketing and he was saying how in marketing, you know, you used to just think about, OK, I want to play the drums. And that's, you know. Email communications or I want to work in strategy. And that's, you know, playing the flute. And now everybody needs to think of themselves more as conductors because they can use AI to do all that. And I thought that was a really interesting analogy. But it also made me think that, you know, not everybody wants to be a conductor. Some people do just want to, like, wake up, put on their, you know, put on their shoes and go hit the triangle. And so, like, what is that going to do to society if people have to, if in order to succeed, you have to level up in terms of how you even think about what a job is. And a lot of people may not want to do that. I mean, it does. It seems like we need to be more creative about what these jobs entail and look like. And I mean, on the flip side, like, maybe that's where live events come into play. Like, it's possible that we should be throwing a thousand times more parties. Like, I think that what are people going to do with all their time? Right. Like, they can actually focus on the arts. Like, I mean, I always think about, you know. You know, Aldous Huxley talked about in the 20th century that, you know, why are we doing 40-hour work weeks? Like, maybe it should be 20. Like, these things become more and more possible as the standard of living can rise. All technological innovations up until this point have not really resulted in less time working, though. Why do you think that this one might? I mean, what's funny is I sort of know for a fact that most people who become very AI-pilled, myself included, like, work about two times more. Yeah, I feel like I've heard that from a lot of people. Once they realize what they can do, they, like, can't stop. They're like, oh, my God, I can do this and I can do that. And they just, like, it starts to envelop their life as they start to do more and more with it. But that's obviously you have to have that sort of drive inside yourself, you know. That's right. I mean, it might just end up, you might just end up having people who are, like, very, very productive and other people who don't have to be, right? Like, my hope is that it unleashes. A brand new, just a firestorm of entrepreneurship, of, like, there are so many problems out there that we could solve for one another. And then maybe they don't have to be all billion-dollar companies. Like, they might be, like, actually a really nice bar where you have community. Like, maybe it's a return to third spaces. I mean, there are just so many things that people like and enjoy that, you know, going back to YC, right? Is YC going to be run by, you know, one person and a whole bunch of AI agents? Like, the reality is, like, no, never. Like, we want to bring together really smart founders who have been there with the next generation of people to do that. And so the people are the point. And if I expand that out into broader society, it's, like, we should have better restaurants. We should have better social services. We should have better cities. We should have more housing. Like, what are the things that people? What do they actually want? Let's work backwards from that. And more and more people can go towards that. We, I mean, we will never truly achieve utopia, but that doesn't mean that we can't try. Well, thanks so much for your time, Gary. I really appreciate it. 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